United Natural Foods to acquire Supervalu

United Natural Foods announced that it plans to acquire Supervalu for $2.9 billion in cash. According to Supermarket News, the deal would create a large, diverse food distributor serving traditional grocery stores via Supervalu, and natural/organic product retailers though United Natural Foods, whose primary customer is Whole Foods.

The acquisition is expected to result in Supervalu's exit from the grocery retail business. Supervalu operates 114 supermarkets under the Cub Foods, Hornbacher's and Shoppers banners. Save-A-Lot had been owned by Supervalu until 2016 when it was acquired by Onex Corporation.

In recent years Supervalu has struggled to compete with larger grocery companies and online food retailers, and as a result has stepped up its wholesale operations. Wholesaling now accounts for 78% of total sales, up from about 44% two years ago. The company's wholesale arm serves a network of 3,437 stores.

The deal is expected to close in the fourth quarter of this year.

Supermarkets lead customer experience survey; Wegmans tops all companies

The Temkin Group, a research and consulting firm, said earlier this month that its 2018 Temkin Experience Ratings survey of 10,000 U.S. shoppers revealed that supermarkets were tops in customer experience ratings among 20 industries evaluated.

Supermarkets posted a rating of 78.5%, up from 78.1% in 2017. The industries near the top of the list include retail (74.4%), banks (73.1%), and parcel delivery (71.9%). A score of 80% or above is considered "excellent," 70% or higher is "good," and below 60% is deemed "poor."

Ratings are determined by customer responses in three main categories - success (can you do what you want to do?), effort (how easy is it to work with the company?), and emotion (how do you feel about the interactions?).

Overall, Wegmans turned in the top rating of all 318 companies included in the survey. The Rochester, NY-based food retailer had an overall customer experience rating of 86%. Among supermarkets, H-E-B, the top company in 2017, and Publix tied for second with a score of 83%.

Rounding out the top 10 scores among supermarkets for overall customer experience were Aldi and Wawa (82%), Trader Joe's and ShopRite (81%), Save-A-Lot and Food Lion (80%), Meijer, Kroger, Hy-Vee and Winn-Dixie (79%), Albertsons (78%), Safeway and Piggly Wiggly (77%), Stop and Shop (76%) and Vons (75%).

ShopRite tops in New Jersey with 139 stores

A story on NJ.com last month listed the 10 biggest supermarket chains (by number of stores) in New Jersey. Here's the list.

ShopRite - 139 stores
Acme - 77
Stop & Shop - 61
Target - 44
Aldi - 42
Walmart - 29
BJ's Wholesale Club - 23
Kings Food Market - 23
Save-A-Lot - 22
Key Food - 22

Stores in New Jersey with fewer locations include Whole Foods, Trader Joe's, Wegmans, Weis Markets, and soon... Lidl.

Report predicts that traditional supermarkets will decline rapidly

A report released by Inmar predicts that nearly one in four traditional grocery stores won't be around in five years. Inmar is an analytics and technology-enabled service provider in the retail space.

The report concludes that dollar share for traditional supermarkets will continue to decline through 2021, while fresh, limited assortment and warehouse stores will gain in dollar share and store count over the same period. In addition, food e-commerce is projected to grow at a rapid pace.

According to the report, store counts will decrease over the next five years by nearly 25% from about 25,000 to 19,000, while dollar share for traditional supermarkets will decrease from 36.5% to 33.7%.

The drug store is the only other significant channel projected to see a decrease in dollar share (-0.6%).

Inmar predicts that e-commerce food sales will more than double by 2021, from $33 billion, or 4% of the current food and beverage market, to $70 billion, or 8% of the projected market.

Limited assortment stores like Aldi, Trader Joe's and Save-A-Lot will grow by more than 21% or nearly 1,000 stores over the next five years, while their dollar share increases from 3.1% to 4.4%, according to the report.

Lidl stores open in three states

The first Lidl stores in the U.S. opened earlier this month in North Carolina, South Carolina and Virginia. At 36,000 square feet, reports say the stores look more like car dealerships than grocery stores, with floor-to-ceiling glass covering much of the exterior.

The selections are nearly all private brands, with the packages made specifically for the U.S. market and closely resembling the national brands they are designed to replace.

According to an analysis conducted by RBC of Lidl's sales flier versus fliers of competitors, Lidl's promotional prices were 12% to 30% lower than all others - including Kroger, Sprouts Farmers Market, Publix, Food Lion and Save-A-Lot - with one exception. Lidl's and Aldi's prices were about the same.

A supplier representative told Supermarket News that Lidl appeared more concerned with quality compared to some competitors, and that the pricing was supported by a more efficient process than other buyers.

More to come as Lidl stores continue to open.

Save-A-Lot closing west coast stores

Save-A-Lot, under the ownership and guidance of private equity firm Onex since last fall, announced earlier this month that it would close all 13 of its existing stores in California and Nevada, as well as the distribution center servicing them.

Supervalu, the discount grocer's previous owner, saw the west coast as a great opportunity, but current CEO Eric Claus told Supermarket News that the investment required to build brand equity and store density would be better deployed on initiatives where the chain was better established.

Save-A-Lot currently has about 1,400 stores from Colorado and states to the east.

The 13 stores are expected to close in a matter of weeks.

Private equity firm to buy Save-A-Lot for $1.365 billion

Supervalu announced yesterday that it has entered into an agreement with private equity firm Onex Corp. to sell Save-A-Lot for $1.365 billion. The deal is expected to close by January 31, 2017.

Supervalu and Onex also announced that they have entered into a five-year agreement where Supervalu would continue to provide support for Save-A-Lot, including merchandising technology, payroll, finance and other functions.

Analysts had predicted the sale price would be higher.

Company officials said that Save-A-Lot's results had suffered recently as a result of reduced SNAP benefits and product price deflation. The discount grocery chain currently accounts for about a third of Supervalu's business.

Supervalu said yesterday that proceeds from the deal would be used to reduce debt and improve its capital structure, and to fund operations and growth. The sale is another major step in the company's transformation into a wholesale-focused company.

Canadian private equity firm said to be leading bidder for Save-A-Lot

On Friday published reports indicated that Onex, a Toronto-based private equity firm, is the leading bidder to purchase Save-A-Lot from Supervalu. An auction is underway to find a buyer. Prior to the auction, Supervalu had planned to spin off the discount grocer into a publicly traded company controlled by Supervalu shareholders.

Private equity firms reportly planning to bid on Save-A-Lot

A recent Reuters report stated that several private equity firms plan to bid on Save-A-Lot, currently a Supervalu banner, in the coming weeks. If the report is accurate, it is not likely that the discount grocer would be spun off as a public entity, as many thought it would.

Reuters' anonymous sources named Advent International; KKR; Clayton, Dubilier & Rice; TPG Capital; Onex Corp., and Thomas H. Lee Partners as potential bidders that could go as high as $1.8 billion.

Save-A-Lot planning six new PA/NJ stores

It was reported last month that Save-A-Lot, the discount grocer that Supervalu is looking to spin off, plans to open six new stores in Pennsylvania and New Jersey. Two of these stores will open soon in Philadelphia, and one in Norristown, PA. The other locations are planned for Lebanon, PA, Pottstown, PA and Trenton, NJ.

Save-A-Lot files IPO, to spin off from Supervalu

Supervalu announced earlier this month that its discount grocer Save-A-Lot filed an IPO and plans to spin off into a publicly traded company to be largely controlled by Supervalu shareholders.

According to Supervalu CEO Sam Duncan, after the separation "Supervalu will be able to focus on providing wholesale distribution services to independent retail customers and operating its five regionally based traditional format grocery banners. Save-A-Lot will continue to be a leader in hard discount grocery retailing in the United States."

According to the prospectus, Save-A-Lot would trade on the New York Stock Exchange. The prospectus also said that Save-A-Lot plans to open about 90 stores per year in 2016 and 2017, and to maintain mid-to-high single digit rates of annual new store growth in future years.

According to Save-A-Lot, the limited assortment grocery channel represents approximately 3 percent of the overall U.S. market and is projected for growth of 8 percent over the next five years.

Supervalu to decide whether to sell or spin Save-A-Lot

Supervalu announced last month that it is preparing to explore an outright sale of the Save-A-Lot discount grocery chain, rather than spin it off as a separate unit. According to published reports, the company has received interest from several private equity firms, and has told them it will consider offers in early 2016. Waiting until 2016, when Supervalu plans to register with regulators to enable Save-A-Lot to "spin-off" as its own company, provides Supervalu with flexibility as it weighs its options.

A possible spin-off had been announced in July in order to insulate the fast-growing Save-A-Lot chain from its parent company's slower-growing wholesale and food retail business.

Buyout firms have to convince Supervalu that a sale would represent a better value to the company and its shareholders than a spin. Industry experts value Save-A-Lot at about $1.7 billion.

Save-A-Lot currently has 1,334 stores, about 70 percent of which are operated by licensees.

Aldi's fastest growing line: organic

A recent article on Bloomberg.com said that Aldi is now trying to make itself more attractive to the type of customer that shops at Trader Joe's.

According to the report, Aldi U.S. CEO Jason Hart believes that American shoppers are increasingly concerned with the content and quality of the food they eat, so the company, which has about $8 billion in sales in the U.S. and is growing at a steady rate, has added items like organic quinoa and coconut oil, chia seeds and grass-fed beef. In fact, Aldi's Simply Nature all-natural and organic line has become its fastest-growing brand.

"This isn't your grandmother's Aldi," Hart said. (That's for sure, considering that Aldi opened its first U.S. store in 1976 when my grandmother was 63, and that store was in Iowa. The chain didn't get to the east coast until many years later.)

According to the Nutrition Business Journal, Americans spent about $33 billion on organic items last year, and these days they expect to find organic selections at both traditional supermarkets and discounters. Aldi's plan is to not only offer such items, but offer them at extreme discounts.

Regarding the company's pricing, a July survey by Bloomberg Intelligence found Aldi to be cheaper than other discounters, including Walmart and Save-A-Lot.

Aldi and Lidl planning shake-up of U.S. grocery landscape

A Wall Street Journal article last month said "the two scrappy German discounters that have wreaked the most havoc in Britain are ratcheting up their U.S. ambitions." The discounters are, of course, Aldi and Lidl.

Aldi currently has over 10,000 stores in 18 countries. (Aldi is actually broken down into Aldi Nord and Aldi Sud, a breakup that occurred in 1960 as a result of a rift over cigarette sales between the Albrecht brothers. Aldi Sud operates Aldi in the U.S. and a number of other countries, while Aldi Nord includes Trader Joe's U.S. stores.) Aldi recently said it would invest about $3 billion into opening new stores in the U.S., and that it plans to increase its U.S. store count from 1,400 to 2,000 by the end of 2018.

The very next day, Lidl, which has over 10,000 stores across Europe, outlined its plans to enter the U.S. market, most likely in 2017 or 2018. As brokers, landlords and real estate developers up and down the east coast know, Lidl has been aggressively pursuing sites for the past year. Lidl is owned by Schwartz Group, Europe's largest retailer.

In Great Britain the success of Aldi and Lidl has contributed to continuing problems - falling share prices, lost jobs and closed stores - for the country's traditional grocers. On the other hand, the success of these discounters has proven to be a boon for consumers in the form of lower prices and more convenient shopping.

The two food retailers "are on everybody's radar in the U.S. today," according to Craig Rosenblum, a retail consultant at Willard Bishop.

With Aldi's aggressive growth plans and Lidl's planned entry into the market, U.S. discounters like Walmart and Save-A-Lot are on notice.

Save-A-Lot planning for corporate store growth

In a May conference call with analysts, Supervalu President and CEO Sam Duncan said the company's goal is to open up to 100 new Save-A-Lot locations this year, including about 60 corporate stores. Beginning in 2018, Duncan projects 150 Save-A-Lot openings per year and anticipates the same 60-40 corporate - licensee mix.

"Supervalu wants to be in control of the Save-A-Lot store openings," according to Chuck Cerankosky, an analyst at Northcoast Research in Cleveland. "They are making sure the customer walks into a well-stocked, clean store that features a more appealing fresh-product assortment than it might have two or three years ago."

Save-A-Lot stores are typically about 16,000 SF, or about one third the size (or even less) of a traditional supermarket.

Save-A-Lot to add 7 stores in PA, NJ

Save-A-Lot announced that it will add seven new stores in PA and NJ. Three of the stores - two in North Philly and one in the Northeast - will be in Philadelphia. Stores will also be added in Norristown and Lebanon, PA, as well as Lindenwold and Bridgeton, NJ. The stores will range in size from 15,000 to 19,500 square feet.

Save-A-Lot, a subsidiary of Supervalu, currently operates 1,300 stores in the U.S.

Giant Eagle to close Good Cents stores in PA, OH

Giant Eagle said last week that it plans to close all eight of its Good Cents discount grocery stores. The decision follows Food Lion's closure of all Bottom Dollar stores last year, which leaves Aldi and Save-A-Lot as the lone discount supermarket chains in the Western PA and Northeastern OH markets.

The company cited "numerous business and economic factors that made it difficult to continue to successfully deliver the shopping experience that customers have come to expect."

Supervalu experiencing growth, ready to take on Aldi

Last week Supervalu announced that all three business segments - wholesale, Save-A-Lot and traditional food retail - grew in the company's fiscal third quarter. Overall, the company had $4.2 billion in sales, a 4.8% increase over the same quarter last year. Net earnings were $79 million.

Supervalu's wholesale business plans for growth in the near future with new accounts, and the company expects to add 65 new Save-A-Lot stores in 2015.

Supervalu also made news last week when CEO Sam Duncan said his company competes very well with Aldi and "will gladly take them on any time, any place."

Regarding Aldi's acquisition of Bottom Dollar, Duncan pointed out that a lot of the Bottom Dollar stores are paying high rents. "We were looking at some of those locations before Bottom Dollar, and we established our rate that we would pay," said Duncan. "And then, they came in above us and paid some very high prices. So, we'll see how that all unfolds."

Perishables driving sales growth for Save-A-Lot

Supervalu reported last month that a focus on perishables is responsible for sales growth at Save-A-Lot, whose fiscal second quarter sales increased 8% (to $1 billion) from the same quarter last year. Overall sales at Supervalu totaled $4 billion, a 1.8% increase.

Supervalu CEO Sam Duncan also reported that identical stores sales at Save-A-Lot improved by 6.5% and corporate stores within that network saw 8.2% identical store sales increases.

The company is investing in Save-A-Lot private label brands and plans to update the packaging of about 1,000 SKUs by the end of the fiscal year. 65 new Save-A-Lot stores are expected to open in 2015.

Delhaize may pull the plug on Bottom Dollar

Food Trade News reported in its August issue that Bottom Dollar Foods, a division of Delhaize America, "has reportedly felt enough competitive heat and is exploring the sale of its 66 stores located in Pennsylvania, Southern New Jersey and Northeast Ohio." 46 of the 66 stores are in the Greater Philadelphia market.

Reportedly several retailers received profile sheets in July and bids for the stores were due on August 13. In addition, Food Trade News learned that Wells Fargo is serving as Delhaize America's investment advisor.

Analysts believe that Delhaize is trying to sell all 66 stores rather than sell individual locations or groups of stores. Supervalu (Save-A-Lot) and Aldi are leading contenders.

According to information that Food Trade News obtained, all but 10 Bottom Dollar stores are leased. The stores typically have significant term remaining and rents of about $10-$12 per square foot, although they range from $1.76 (most likely a ground lease) to $26.23. Store sizes run from 16,848 to 30,352 square feet, with most closer to 20,000 square feet. Weekly sales volumes range from $103,000 to $296,800, with an average weekly volume of $156,802. 

Bottom Dollar entered the Greater Philadelphia Market in 2010, and many industry observers were skeptical. Discount operators like Aldi and Save-A-Lot were already in the market, not to mention PriceRite, dollar stores and Walmart Supercenters. 

Referencing Bottom Dollar locations, the Food Trade News story quoted a veteran merchant as saying "You get what you pay for... After seeing what their operating model was it was pretty clear that their questionable site selection would not be beneficial."